AOL swings to profit in Q3 as ad sales rise 7%

AOL swings to a profit in Q3, sending shares higher in premarket trading.

Web portal AOL (NYSE:AOL) Tuesday said it swung to a third-quarter profit thanks to a seven-per-cent rise in advertising revenue, beating estimates and sending its shares higher in premarket trading.

Shares of the company were up 3.04 per cent in premarket hours, trading at $36.90.

For the quarter that ended September 30, net earnings stood at $20.8 million or 22 cents per diluted share, compared to a year-earlier net loss of $2.6 million or two cents per diluted share.

Total sales were flat year-over-year at $531.7 million, as advertising growth was offset by a drop in subscribers.

Analysts polled by Thomson Reuters had expected per share earnings of 17 cents on revenue of $521.56 million.

“We just reported the best relative revenue performance in seven years and the second consecutive quarter of year-over-year profit growth, exceeding our expectations,” said chairman and CEO Tim Armstrong.

“We have positioned AOL for growth in 2013 and beyond with consumer and advertiser demand growing for our premium content and innovative products, video, services and ad formats.”

Global advertising revenue grew seven per cent to $340 million, from $317.7 a year earlier. AOL said the increase was largely due to growth in its properties display and third party network revenue, which totaled $248.2 million for the quarter.

In the company’s search and contextual segment, revenue rose eight per cent to $91.8 million, driven primarily by continued double-digit growth in search revenue on AOL.com.

Subscription trends continued to improve, AOL said, with a 10-per-cent decline in revenue year-over-year and a 1.8 per cent monthly average churn – the rate at which subscribers cancel services. This compares to a 22-per-cent decline in revenue and 2.2-per-cent monthly average churn, a year ago.

The company had 2.9 million subscribers in the third quarter, down 16 per cent from 3.5 million a year ago. Average revenue per user grew six per cent to $18.47, from $17.49 a year earlier.

The company said unique visitors to AOL properties were 111 million, growth of four per cent year-over-year.

Earlier this year, the company sold a portion of its patent portfolio to Microsoft Corp. (NASDAQ:MSFT) in a deal worth $1.1 billion. It sold over 800 patents, ranging from online advertising to mobile handsets. Microsoft will also license another 300 patents from AOL.

The New York-based company plans to return 100 per cent of the proceeds from the patent sale back to shareholders.

On December 14, the company will pay a $5.15 special cash dividend to shareholders of record at the close of business on December 5.

No investment advice

You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

You understand that we may be providing advertising and/or marketing services to companies mentioned on the site. A full list of companies that are paying for services from us, or our affiliated companies in the UK and Australia can be viewed here